China's Rural Market Success Goes Global

The Chinese computer technology firm Lenovo recently launched a campaign to penetrate rural small and medium-sized business and consumer markets in Indonesia, Brazil, Mexico, India and Turkey over the next three years.  The company, which has grown faster than any other major PC manufacturer for five straight quarters, is aiming to replicate its success in rural China by establishing expansive distribution networks in key emerging markets. As demand for tablets and smartphones rises in urban centers, rural segments are becoming the new drivers of low-cost PC demand. In Indonesia alone, Lenovo's efforts to penetrate the rural market led to a 100% increase in computer shipments in the first quarter of 2011.

Despite strong early results, Lenovo faces fierce competition from other international brands and entrenched local "hero" brands such as HCL of India and Positivo of Brazil, which rejected an acquisition offer from Lenovo in 2008. With a thorough understanding of local markets and well-established distribution and marketing channels, local brands are poised to capitalize on increasing rural demand for low-cost PCs. Lacking the same familiarity with these channels, new entrants into these markets also face transportation challenges and weak retail presence.

A uniquely tailored approach that takes local logistical and economic realities into consideration is critical to penetrating rural markets. Building brands and implementing strategic marketing plans that place an emphasis on understanding local tastes and conditions can provide firms with a competitive edge. Acquiring and partnering with local brands can also provide foreign firms with a strategy to mitigate risk. Competitive analysis that includes local brands as well as multinational firms can help new firms to create tailored go-to-market plans that include product, place, pricing and promotional strategies that are responsive to local market conditions and the needs and wants of rural consumers.